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Boost in remortgage lending

Boost in remortgage lending

Category: Mortgages

Updated: 16/11/2015
First Published: 28/10/2015

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Remortgaging activity is enjoying a significant boost at the moment, with many homeowners looking to capitalise on the hugely competitive mortgage rates available to cut their monthly repayments. Given the benefits, it's little wonder…

The autumn rush

Figures from LMS have revealed that the number of remortgage loans advanced in September grew by 12% from August, rising from 25,600 to 28,686 in the month, while on an annual basis the total marks an increase of 4% (up from 27,700 in September 2014). The value of those loans also recorded a notable increase of 5% month-on-month (up from £4.2bn in August) and 3% year-on-year, with September 2015's lending figure standing at £4.4bn.

This clearly highlights the growth in remortgage activity in the last year – and even in the last month – with more and more people seeking to take advantage of the market. Not only that, but they're seeking to withdraw more equity from their home in doing so, with the average amount of equity withdrawn through remortgaging standing at £31,241 in September. Although this is a drop from August's record figure of £35,590, it's a whopping 77% higher than in September 2014, when the typical remortgagor took out £17,644 from their home.

Despite the growth in equity withdrawals, affordability remains manageable for much of the country, with many people able to drop down to a lower loan-to-value (LTV) – the average remortgage LTV for eight out of 10 regions fell during the month – which means they could be able to lower their mortgage repayments even further. The North West and North East experienced the greatest falls, with average LTVs in both regions dropping by 7% to stand at 59% and 60% respectively.

Approvals on the rise – and with good reason

Figures from other organisations have backed up this trend, with the British Bankers' Association noting particular improvement in terms of mortgage approvals. The figures revealed that, although approval volumes fell back slightly on a monthly basis, all sectors of the market saw healthy growth year-on-year – and remortgaging saw a particular boost, with approval volumes being up by an impressive 40% compared with September 2014.

When you consider just how low mortgage rates have become recently, it isn't hard to see why so many people are taking the plunge and remortgaging to a better deal. Our own figures highlight the benefits even further – those who took out a two-year fixed rate mortgage in October 2013 would have secured an average rate of 3.43%, but they'd now be faced with reverting to a typical standard variable rate (SVR) of 4.82%, a jump that could take a significant toll on their finances. Conversely, they could remortgage to a new two-year deal and secure one of the lowest rates ever recorded, so really, it's a no-brainer.

"There is little surprise that mortgage borrowing remains strong, as it has been throughout the year, with many borrowers choosing to opt for some of the lowest deals they have ever seen," commented Charlotte Nelson, finance expert at Moneyfacts. "We've seen average fixed rates fall quite dramatically, with the average two-year fixed rate mortgage down from 3.51% a year ago to 2.75% today, and five-year fixed rates falling from 4.08% to 3.29% over the same period.

"By remortgaging to a new fixed rate now, borrowers are not only securing low monthly payments today, but are buffering themselves from any future rate rises, and with base rate now unlikely to rise until mid-2016, many borrowers are capitalising on these low-rate deals – and many are choosing to opt for a longer-term fixed rate to ensure they benefit from this rate drop long into the future."

Remember, in order to secure a mortgage, credit card or personal loan you need to have a good credit rating. To find out if yours has a clean bill of health, contact a credit check provider, such as Experian CreditExpert to investigate your credit report.

What next?

Time to get in on the action? Compare the top remortgage deals to see how low your repayments could be.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.